Allre Causes Brokers To ReThink Strategy

by Victor Lund on September 18, 2014

The FSBO dam just sprouted another leak, and brokers better pay attention. If you have not heard about Allre, you better watch the video below right now. It is collaboration between banks like Prime Lending, Home Insurance providers, home warranty companies, and even a lock box vendor to facilitate FSBO sales. The fee to the consumer is ZERO – nothing.

There are no brokerage services at all, so they completely surpass all RESPA regulations. It is 100% FSBO. The only thing that will sit between Allre and success is venture capital. If they attract enough venture capital to attract the consumer, traditional brokerage is going to hit a wall.

WAV Group is a strategy company. To remain competitive, businesses need to act in ways that allow them to survive in a fast changing market place. In the case of Allre – they are only launching in San Diego. Perhaps the industry at large does not need to hit the panic button yet. However, you probably need to pay close attention. I know that we will.

San Diego is a high value market place. According to Zillow, (http://www.zillow.com/san-diego-ca/home-values/) the average home price in San Diego is $492,000. As a side bar, I did a Google search for “the average home price in San Diego and the only broker who had the information was ZipRealty – an article from 2012; Trulia Voices had a question about home building; and the best first search result was Zillow. Where are all of the Brokers, Associations, and MLS answers?

Why The Business Will Work

Everyone talks about the 6% commission rate – but my research shows that the number may be a bit lower in actuality which is line with the Allre CEO talks about in her pitch. It makes San Diego a ripe candidate for this style of opportunity pursuit. That is enough incentive for FSBO buyers and seller to take a risk and sample the service. I would not be surprised to see a similar service pop up in San Jose, Santa Barbara, Ventura, San Francisco, and other high-end real estate markets in California. If you average sales price is below $200,000 – the incentive for FSBOs to save money is less attractive.

Driving Consumer Traffic

Today, there are a number of third party websites that allow for FSBO listings. They already have lots of consumer traffic buoyed by a great consumer search experience and brokers and agents publishing their listings there. This opens the door for Allre to publish their FSBO listings there too – comingling in with traditional listings in a way that makes it seamless for the consumer to stumble upon these listings. Moreover, in most cases, syndication to FSBO sites is also free

Broker Strategy #1 – if you are partnered with a third party portal that advertises FSBO listings along side traditional listings, contact that company and discuss your serious concern that they may be enabling a business that disrupts your business. Perhaps they will consider changing their policy before you change yours. (you may also want to talk to the mortgage, insurance, and other home services partners you have if they are doing business with Allre.)

Broker Strategy #2 – Develop a competing Business that ties your brand to the service before an unknown brand owns the landscape.

In truth, this is pretty hard to do. The keynote to Allre is that the company not a broker. And, as such, they are beyond the reach of RESPA, State Licensing, MLS Rules and Regulations, and so forth. However, if you are a large real estate brokerage with well-established lines of home services offerings in mortgage, insurance – you may consider creating a new startup to compete with Allre. This is especially true if you are in San Diego. If Allre cannot meet the forecast of their venture capital investors, they will shrivel up and blow away like many FSBO offerings before them. Once they disappear – close up your FSBO shop.

FSBO companies and limited services companies have existed along side traditional real estate businesses for many years. For many buyers and sellers, FSBO offerings have been cumbersome and painful – so much so that many listings that start out as FSBO end up in traditional transactions. A company like Allre may be a great lead generator for traditional brokerage. You may find that you can hook the consumer with the offer of free, then refer that consumer to your traditional company for a better broker-dollar transaction than you have today with many of your top producing agents

Get On The Transaction Management Path

The key element of Allre that makes the service work is their end-to-end transaction management and offer management solution. If you do not have end-to-end transaction management in your business, you had better start there and get on it now. There are three legs to the Transaction Management solution – They include Digital Signatures; Document and Forms; and the TM system itself. More than half of the brokers in the United States to not have a fully functioning Transaction Management system in their business today. The good news is that 34% of brokers indicate that they plan to buy or replace what they have in 2014. Strangely, they are not so inclined to replace or buy document management solutions or digital signature solutions. For the complete WAV Group report on Broker Technology Adoption and Satisfaction, download it for free here (http://waves.wavgroup.com/2014/04/09/wav-group-releases-broker-technology-adoption-and-satisfaction-study/)

My keynote to brokers.

Do not take this threat lightly. Allre may fail. Their goals are ambitious and they may not attain the funding or deliver the consumer experience that will lead to success. But, the threat is real and the idea is one that, if well funded and executed, will undoubtedly succeed. The Allre CEO says in her video that if nothing else, ‘the pressure that they will put on the industry is to drive down commissions and enhance the level of service provided by REALTORS.’ This is undoubtedly true. Take 12 minutes to watch the video below.

I think Allre is very close. All they need to do is upsell the DIY to a full or limited service broker — along the same lines of a FSBO.com. Where they go wrong IMHO is the way they are leaving out advisors of any kind. I believe partnering with the structure in place (been developing for over a century!) by offering solutions that create a more efficient marketplace while, at the same time, offering BOTH the industry and consumer unbundled/transparent CHOICE (depending on what the client’s needs are) — is the wave of the future. This is why we are taking the Fee-For-Service (FFS) compensation model OPTION and developing programs that include the human element as we believe professional advice is the cornerstone of any business transaction.

It is a really interesting concept. In the video, Kathy herself says that real estate transactions have about 50 moving parts. That’s true. I don’t think they would be in RESPA violation if they included some Realtors as one of their vertical pieces to help with the transaction management part.

I love the concept, love the product…very slick and comprehensive! What, I personally believe, is being overlooked is human psychology. Buyers attracted to FSBO’s are ones who believe they can get a better deal by eliminating real estate agents. It will be interesting to see how it plays out. My gut reaction is that most buyers will lowball and the sellers will not be better off when all is said and done. As a fellow startup and veteran REALTOR(r), I wish ALLRE good luck in bringing their vision to the market. Competition is what drives inivation!!!